School financing is complex

This article submitted by Michael Jacobson on 5/09/01.
School finances have made lots of headlines in recent months. From the district cutting $500,000 from its budget for the upcoming school year to the nip-and-tuck finances of the school building project, every dollar the school spends is under scrutiny.

Call this School Finance 101, though these days school finance might resemble that dreaded calculus class rather than an easy-grade freshman elective. Every dollar the school district gets is calculated by a formula, using weighted pupil units, concentration factors, adjusted net tax capacity, and even average building age.

"It's very complicated," said superintendent Howard Caldwell. "It's not easy to understand. Or even explain."

"Years ago there was more consistency as far as revenue, and the rules of the game were more consistent. We knew what we were getting and how we were getting it," continued Caldwell, who has been superintendent for nearly 20 years.

Caldwell likes to call the legislative proceedings a shell game, with money disappearing from some education programs and appearing as increases elsewhere. For instance, according to the Department of Children, Families, and Learning (CFL), over the past five years the basic per pupil aid has increased by $759, from $3,205 to $3,964, seemingly an increase of almost a quarter. School finance charts.

But CFL points out that of that increase, over half of it is rolled-in funds. For example, in 1995-96, the school district received $3,205 per pupil unit in basic aid, plus $300 per pupil unit for transportation and training and experience of its teaching staff. The next year the basic aid was increased to $3,505, but separate transportation and training dollars were eliminated, meaning the net

effect was static funding.
Over the past five years, at least four separate funds have been rolled into the basic formula. Training and experience dollars were completely eliminated two years after they were rolled into the basic formula.

"The problem we face at school is it's getting much more difficult to determine exactly how much money you will actually be receiving for any given year," said Caldwell.

The House and Senate each passed a K-12 funding bill last week, and each contain different proposals. The actual funding for the next two school years won't be known until the two houses agree and get the governor to sign on.

"It's almost impossible to budget beyond one year because you don't know what you're getting," said Caldwell.

Like many rural school districts, Paynesville also has declining enrollment, which further impacts a dwindling general fund. "With enrollment declines, it just complicates it that much further, because you have no room for error," said Caldwell. "There's no money to fall back on."

The school district has eight funds: the general fund, the food service fund, community education, capital expenditure, building construction, debt redemption, and a trust fund, which earns about $6,000 a year in interest on a donation to be spent at the high school.

The biggest fund - the general fund - is the one of the most concern these days. It picks up the brunt of the checks: from the salaries, to supplies, and other operating costs. The latest budget for the school indicated a potential $1.17 million deficit in the general operation this year, which could bring the general fund into the red.

Caldwell doesn't think the school's losses will be as bad as budgeted, noting these are just projections of spending and revenues. "We very seldom spend every cent we get. Plus we often times get more revenue than we anticipate, " he explained.

Even so, Caldwell frankly suggests that the school could be in statutory operating debt by the end of the year. Then the district will have to make a state-approved plan to get itself out of debt.

The school was in such a predicament a decade ago when Caldwell came. Back then though, a surging population in the elementary grades helped get the district out of debt sooner. This time, the declining enrollments in the elementary school will have larger impacts as these small classes age. (Older students are given more weight by the state in its per-pupil calculations.)

The school's food service and community service fund are generally self-sufficient. For food service, the school board can set the lunch fees to make sure the district breaks even on its breakfasts and lunches. The community education department gets state aid for its overhead and administration, but needs to break even on its programs, which is why classes are cancelled for insufficient numbers.

The school does have a balance in its capital expenditure fund. The state allocates money to the district each year based on the age of the school buildings. The board recently approved a capital expenditure plan for the coming year. The balance in this fund would most likely be tapped if the building project - which has a temporary fund - comes up short.

The last fund, debt redemption, is the fund from which the district makes it bond payments. This fund is also solvent, and will increase from the extra levy and state aid to pay for the bonds once the project is completed.